Tax Year and CGT

ASmallHotel

Am I correct in thinking that CGT paid on the sale of a rented property is levied and has to be paid on a one-off basis? In other words, if you are selling two properties, the tax paid is not dependent on the tax year. So, if you have sold one property in a tax year, there would be no advantage in waiting till the next tax year before selling the second property.

eskbanker

The CGT payable may be dependent on the tax year, if splitting it over two allows use of any residual basic rate headroom?

arianalowe

The charge on such earnings is calculated as capital gains tax, where the charge relates to gains made in one tax year, which extends between April 6 and April 5 the next. Always account for the gains prior to the tax return due date to avoid enhanced penalties.

saajan_12

ASmallHotel said:

Am I correct in thinking that CGT paid on the sale of a rented property is levied and has to be paid on a one-off basis? In other words, if you are selling two properties, the tax paid is not dependent on the tax year. So, if you have sold one property in a tax year, there would be no advantage in waiting till the next tax year before selling the second property.

The amount of the taxable gain depends on other gains made in that tax year - currently you have a £3k allowance per year, so if that continues next year, you could use another 3k allowance on the second property if you sell it next year. Note the 3k only applies to the year you sell it, not how many years you owned it. 

Once you have calculated the taxable gain, the tax rate (18% or 24%) depends on your tax band, which depends on your total income and capital gains that year. So if the second property gain takes you over the higher rate threshold, then it might be better to wait until the following year to use up your basic rate band next year. However if you're already paying higher rate then it doesn't help. 

ASmallHotel

Thanks for the explanation ... very useful comments.